EC Clears Telefonica's E-Plus Purchase

BRUSSELS ( The Deal) -- The European Commission on Wednesday granted conditional approval of Telefonica's 8.6 billion euro ($11.7 billion) purchase of Royal KPN's E-Plus unit after the Spanish buyer agreed to several conditions to allay competition concerns.

Regulators ended their six-month in-depth probe into the deal after the Madrid-based buyer pledged to sell up to 30% of the merged entity's network capacity to between one and three so-called mobile virtual network operators, or MVNOs, before closing the acquisition.

Telefonica also promised to divest radio wave spectrum and other assets, either to one of the MVNOs that buys capacity or to a new mobile operator in Germany, and to offer wholesale 4G services to all interested players.

For Telefonica, the third time was the charm with its remedies package, which finally won over EC antitrust busters -- mainly because of its commitment to secure so-called upfront buyers for its network capacity -- after two earlier incarnations failed to past muster.

The upfront buyers include German cellular reseller Drillisch AG, which will take a 20% capacity chunk, and reportedly also Freenet AG, United Internet AG and Liberty Global plc's Unitymedia Kabel BW.

"The commitments offered by Telefonica ensured that the merger will maintain effective competition although it reduces the number of independent mobile network operators in Germany from four to three," Almunia told journalists in Brussels after the EC decision.

The Spaniard also urged EU governments to remove remaining national barriers to having a true single telecoms market across the 28-nation bloc. "What is needed most of all is to eliminate the remaining national barriers, which mainly relate to national procedures for allocation of spectrum, and the lack of a single European regulatory framework."

Until these barriers are removed, he said, "consolidation should not occur at the expense of consumers. They should be able to choose between different mobile providers and should enjoy competitive prices."

The European Commission gave the green light to the E-Plus deal over the objections of several national regulators, including Germany's Federal Cartel Office.

Brussels also came under criticism for its December 2012 approval of Hutchison Whampoa Ltd.'s purchase of Orange Telekommunication GbmH from Mid Europa Partners -- another deal which cut the number of operators from four to three in Austria, where mobile prices have since risen. An EU official said that without the latest commitments offered by E-Plus, there would have been price rises in the German mobile market as well. Looking back, Almunia said he "regrets" the Austrian decision, which also followed an a Phase 2 probe.

In future telecoms tie-ups with a cross-border dimension, the European Commission will continue to be the best-placed vetting authority, Almunia insisted. "The case adopted today had an EU dimension because the players are not national but at least European if not global, and we were entitled to deal with this case." He also said that in cases where the players are purely national, the EC would be "happy to" refer any member state request to conduct the review.